Friction Free

Macao Studio City may be a little late to the Cotai party, but its developers promise a smooth and fun-filled experience

Wednesday, 17 December 2008 00:00

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Macau Studio City

It's no secret that the global credit crisis has had a negative impact on funding for Macao Studio City and pushed back the projected opening date of phase one of the project to 2011.

Richard Hamilton, Vice President, Development for Taubman Asia, which has a 25% stake in the retail portion of Macao Studio City, isn't downhearted.

Hard facts

"When I started on this project we were talking about 2009. Now we're talking about 2011," he says bluntly.

"We've had to restructure our ownership and debt/equity ratios to respond to the world we live in. It's a different world and we can't put our head in the sand about that. In some regards it's frustrating, but in many other ways it's an opportunity," he suggests.

Headlines about the credit crunch and suspension or slow down of construction work on other gaming projects in Macau don't alter the fact that the territory is in effect the biggest gaming laboratory the world has ever seen.

Never before in the history of the modern gambling and entertainment industry, has so much hardware and software, including human talent, been gathered together in one market at such speed. To add to the excitement, there's also a certain amount of trial and error.

Asia's Las Vegas?

Certain aspects of human behaviour are common across cultures—crucially a love of gambling and shopping. But few experienced observers of the local gaming scene believed that the Las Vegas resort model could simply be shipped across the world and swallowed whole by an Asian audience. The US operators in Macau have already found for example that their customers are less interested in fancy nightclubs and restaurants than they are in favourite lucky baccarat tables or favourable credit terms in the VIP rooms.

Macao Studio City's access to Chinese star entertainers through one of its investors, eSun Holdings, could be precisely the kind of localisation of content needed to offer a unique competitive advantage to the resort in an increasingly crowded market.

Insider's view

Taubman Asia's Mr Hamilton gave Inside Asian Gaming a privileged glimpse into the decision-making process for the Macao Studio City project, and how the components will work to anchor each other, and how 'integration' means knitting in to every aspect of the local market—including the local transport system.

"We're delighted that the infrastructure is evolving. We think our timing in 2011 will work very well for us with the light rail. In order to develop the critical mass of visitors on the Cotai Strip, we want to see all the projects succeed," he says.

Opportunity

Mr Hamilton suggests that the delayed opening may help Macao Studio City in particular by giving time for the Macau tourism market to develop and mature and move up the value chain.

"If you look at food and beverage as an example, it's clear that in Macau the taste of visitors is very much skewed to an Asian palate. Many people are also very happy with simple Asian meals such as noodles," he points out.

"As time evolves, we'll look to upscale that and take it in a more fine dining direction."

Taubman, a company with more than half a century's experience in developing and operating shopping malls in the United States is naturally focused on the retail business. Mr Hamilton stresses though that his company is interested in every aspect of the site, as this is the only way to deliver a successful resort to the customers and investors.

Dedication

"We are next to the Lotus Bridge immigration point, which provides opportunities for 18,000 people per day to come from Mainland China. It's the only land crossing directly onto the Cotai Strip."

Whether arriving from the land border or via the ferry terminals and airport, tourist buses and coaches will be able to pull up in airconditioned comfort in the property's underground car park.

People moving

The site, trademarked 'Where Cotai Begins' will be served by the light rail system planned by the Macau government. The transport link was mentioned during the annual policy address of Macau's Chief Executive Edmund Ho recently as one of several important infrastructure schemes to be funded in a 10.2 billion patacas (US$1.28 billion) economic stimulus package. At last estimate, the rail scheme is likely to swallow nearly half of that budget, and no construction date has yet been announced. Mr Hamilton is confident though that the project will go ahead.

"The light rail system will be capable of 16,000 people movements per hour," he explains.

"Next door to our site is one of the 23 light rail stations that will directly link the Cotai Strip with the airport, the new ferry terminals, and the Macau peninsula."

Circulate to Accumulate

Macao Studio City's success depends on visitors being able to move easily around the site

The whole of the Macao Studio City site is designed as a machine for generating revenue, but one with a decidedly human face. The way to achieve this, suggests Richard Hamilton of Taubman Asia, is to make the space exciting, but also comprehensible and navigable.

"We want to see the customer circulate through the property. To achieve this we need a property that offers the potential for movement," he explains.

The Musical Mousetrap

Concerts by top local stars (and the sight of the occasional Bunny Girl) will create a Las Vegas-style anchor for Macao Studio City

One of the key things that could differentiate Macao Studio City from all the other 'mousetraps' vying in the next few years for visitors' attention on the Cotai Strip™ is its ability to offer back-to-back concerts by stars who are genuine household names in China.

This is because one of the consortium partners, the entertainment conglomerate eSun Holdings, manages some of the top Hong Kong film actors and Cantopop singers.

Star billing

"We would be looking to follow the Las Vegas-type model and have a performer anchor our theatre and our integrated resort for several months at a time," says Mr Hamilton.

"That's often quite appealing to some of these acts. With the evolution of recorded music they are not making as much royalty out of that [as previously]. For performers to make money they need to do live performances. A lot of them get pretty ticked off with travelling [on tour] every week. So to be able to fix themselves to one place like Vegas, or in this case Macau, for two or three months, makes them think 'Hey this is pretty good'," adds Mr Hamilton.

"We very much want the entertainments to be high profile and highly sought after. People will travel to Las Vegas when the likes of Elton John or Céline Dion are performing. We think people may do the same if an act such as [singer and actor] Andy Lau from Hong Kong is on the bill."

Staying power

Mr Hamilton says headline acts on extended runs could be an important way of pushing up length of visitor stay.

"Vegas in the last 20 years has really extended the length of visitation from one and a half nights to four nights. Here [in Macau] we're back at that one and half nights. The entertainments and conventions are certainly one of the avenues to extend the stay."

Macao Studio City's theatre will seat around 2,500 people per show. The convention facility, though more boutique than The Venetian's mass market offer, can nonetheless seat 4,500 people.

Hotels

"We're also going to have a range of hotels to suit different price points," says Mr Hamilton.

"We have a Ritz-Carlton Hotel of five stars, we have a Marriott of four stars, we have a Tang hotel with six stars and a W. hotel of five stars.

"It'll be interesting also to see how the restrictions on IVS [China's Individual Visit Scheme] will affect length of stay," he adds.

"Some of our retailers are actually suggesting that if people can't come as often, they might stay longer. If I can only come every three months, I might stay for three nights rather than one day."

The 80/80 Rule

At least 80% of Macao Studio City's visitors will pass 80% of the stores, says Taubman

Macao Studio City's casino is an essential component in creating the buzz factor that will attract visitors to the venue. But the property is designed in such a way that all the components, including the entertainment and retail, feed from each other, says Richard Hamilton of Taubman Asia.

"The upper level of the property is where the theatre will be located, and the gathering area for the audience will overlap with the retail mall to further integration and crossover of traffic," explains Mr Hamilton.

"We have what we call the 80/80 rule," he adds.

"That means 80% of customers pass 80% of the stores. This project will have its iconic stores taking advantage of 1,200 feet of frontage on the Cotai Strip.

Flagship stores

"Our brands will be similar to what you see at the Four Seasons. We won't look like The Venetian [mall] in any way. The difference between us and the Four Seasons [mall] is that I would describe the Four Seasons stores as more like airport stores, in that they're fairly small, selling more the accessories range. Our stores will be more the full line range like you might see in stores in Canton Road [Tsim Sha Tsui, Hong Kong] and central Hong Kong," he explains.

"In some instances they will be ten times the size of what's in the Four Seasons. Typically they will be five times the size of those in the Four Seasons."

Mr Hamilton says Macao Studio City will be catering to shoppers who are already sophisticated consumers of brands.

Retail therapy

"The Chinese customer in my experience is very well informed. They will know where the full range is available. They will want to see the full range. We notice that in the turnovers achieved by the big stores in Hong Kong, where there's 12 [Louis] Vuittons. The best stores on a rate per square foot are the biggest stores.

"The customers want to see everything. Even if I'm not a customer for a Louis Vuitton trunk and I'm still at the key ring stage [in terms of affordability] I still like to see the trunk, even when I buy the key ring. Maybe it's an aspirational thing.

"Each element—the convention space, the hotels, the theatre, the shopping—all needs to be best in class. It all needs to be adding to the foot traffic," says Mr Hamilton.

"It's everything within the resort that keeps people moving around the property, that holds people for longer periods within the property and that offers overlap within the respective

Macao Studio City quick facts

Cost:

US$2.4 billion

Completion date:

(Phase one) 2011

Location:

Cotai, Macau

Design architect:

Paul Steelman Design Group/Asia

Site area:

32.3 acres (comprising 3.5 million square feet of usable space)

Developers:

Cyber One Agents Limited, a joint venture between New Cotai LLC (40 per cent) and East Asia Satellite Television Holdings (60 per cent)

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